Managing Money God’s Way

No matter what your budget is this Christmas, remember to be thankful.

You might have a lot. You might have a little. If you are driving a beat up old car, be thankful for that old car. You would rather drive that than walk, wouldn’t you? There is always something to be thankful for.

That’s what contentment is all about. When you understand and really grasp contentment, it becomes easier to save money and invest. Stress slowly disappears. Budgeting is easier. Relationships improve.

Without contentment, it’s easy to be bitter and apathetic. Happiness is sold to us, especially during this time of year. We think if we can just get one more piece of stuff that “true” happiness will be right around the corner.

We say things like, “I’ll be happy when I get that house!” or “I’ll be happy when I get that new car!” But happiness cannot be bought. Sure fun—in the form of a house, a car, a new LCD television—can be bought, but fun is temporary. True happiness, or contentment, is lasting.

You can get out of debt, save money, and get on a budget, but until you realize that stuff doesn’t bring contentment, you will always feel stressed and unhappy. Contentment brings peace. And isn’t this time of year about bringing “peace on earth and good will toward men”?

Remember what this deal is all about. It’s not about trees, lights, gifts, baked hams, and shopping malls. It’s about a little child who was born in a manger and grew up to die on a cross. It’s about peace on earth and good will toward men.

So if the Christmas frenzy is wearing you out, you’ve missed the point of Christmas. Make a plan with your money, and make a plan to get back in touch with the true meaning of this special day.

It has been said that nearly half of American workers are living paycheck to paycheck.  Combine this with the news in recent months of housing foreclosures, late payments on credit cards, and other types of loans and it is easy to see why so many Americans are struggling with their financial lives.

What is Living Paycheck to Paycheck?

I am not sure if there is a true definition of “living paycheck to paycheck”, but I know I have been there myself.  If I can sum it up by example, it is the day before payday and I am breathing a sigh of relief after logging on to check my balance in my checking account (first time in 2 weeks) and realize that I am not overdrawn, and there is still a few bucks in the account.

The Statistics

• 70% of people in North America live paycheck to paycheck.
  - The Wall Street Journal
• 17% of Americans do not have enough savings to cover 1 week without a paycheck. 55% could not live for 3 months or less without a paycheck.
  - USA Today
• The estimated average credit-card debt per US card-holding households in 2005 was $9,312.
  - Time Magazine
• The personal savings rate in the US has now fallen to -2.2% — the lowest in 60 years.
  - The Department of Commerce

The numbers tell all.  Most of us spend everything we make each month.  In fact we spend more than we make, because we carry a balance on our credit cards.  I imagine a large percentage of us could save something every month if we just cut back on our lifestyle.

Save Something, Anything

I used to fall into the category of saving nothing because the amount of money I had left over at the end of every month was so small I thought it would not make a difference.  How wrong I was!  Even $20 a month adds up over time.  In just a few short months you could build up a $100 cushion in your emergency fund.  Here are a couple of ideas to get you started on the road to saving:

1. Find one or two monthly expenses you can live without and get rid of them.
2. Open a high-yield savings account.
3. Set up automatic transfers each month in the amount you saved by reducing your monthly expenses.
4. Earn extra money (work part-time, start a blog, etc.)

The point I am trying to make is to start saving something.  Saving nothing this month leaves you right where you started, living paycheck to paycheck.

Often the hardest part of doing something is just getting started.  For example, millions of Americans smoke and most people know that smoking will cause long-term health issues, yet they don’t quit.  Why?  The majority of people know that McDonalds is not only fast, but it can also be bad for you (and can be expensive).  Yet, thousands of households feast nightly at the altar of the dollar menu.  Why?  I think the answer to both of these questions is because it is easier to keep doing what you are doing than to change your lifestyle.

Pay Me Now, Pay Me Later

Fram, the maker of automobile oil and air filters has a very effective commercial that says, unless you take care of your car problems today, no matter how small they appear, you will have to pay someone a lot more money to fix the big problems later caused by years of neglect.  The same idea applies to our personal finance situation.  If we refuse to make the necessary life changes now to address our current problems, the problems in years to come will be a lot bigger.

Have you thought about how you are going to pay for your kids college? What about your own retirement?

Just Do It!

In 1988, Nike introduced a new slogan – Just Do It!  I am pretty sure that almost everyone has at one time or another heard or read those words.  Most likely, especially if you are a parent, you have used those words.  But too often, we ignore the meaning behind the phrase and become content with ‘not doing it’.

The thing we are not doing is obviously the one thing in our life that is preventing us from being successful.  The weird thing is that the one thing that is holding you back, probably isn’t that big of a deal.  As a matter of fact, for most people, 30-minutes a week, could change their financial life forever. What am I talking about?

Success Begins with a Budget

You guessed it a budget.  What else would I be talking about on a Personal Finance blog.  Maybe you have a budget, but you aren’t living on it.  Maybe you and your spouse just can’t agree on how to spend your money.  Whatever the reason you are not living on a budget, it is time to treat the problem and let go of the excuses.

I have been having a discussion with my wife lately that centered around the topic are we ‘living within our means’ or ‘living below our means’.  I think they are two phrases that are completely different and here are my ‘definitions’ of them.

Living Within Your Means

To me, this phrase is too positive.  Living within your means sounds like you are spending everything that you earn. That sounds more like living paycheck to paycheck.  Which one sounds more positive to you? If I told someone I was living within my means, they would think that I am getting by just fine.  However, since I am spending everything that I earn in order to pay the bills, mortgage, debt, etc., I am in no way saving any money.  They wouldn’t think to ask if I am saving money because the phrase kind of implies that I am saving when I am not.  However, living within your means also implies that you are taking on no additional debt.  Since I am only buying things that I can afford based on my income, I would not be buying things that I cannot pay with cash.

If I told you that I am living paycheck to paycheck, you would probably feel bad for me.  Living paycheck to paycheck is more negative and it definitely applies that I am saving no money.  I am here to tell you that these phrases are the same thing and there is no difference.

Living Below Your Means

When someone says that they are living below their means, I automatically think of clipping coupons and driving an old beat up car.  I don’t know why, but that is just what I picture.  However, I feel that living below your means simply means that you are able to sustain your standard of living by spending less than you earn.  You may be completely comfortable with the way you live your life financially.  You just do not spend all of your income meaning you can save.  You can save up for retirement, a car, a house, etc.

What are your definitions of these phrases? Are they radically different than mine? Which category do you feel you fit in?

I write this article today, as I am going through the process of determining if I am spending money that I really don’t need to.  This is something I think we should all go through periodically.  It helps us to see if things have crept into our spending that we could get rid of.  It is like when you are looking for something and it is right under your nose, but you cannot see it.

The same thing is usually true with our money. Unless you are living on a budget it is very likely that you are spending money each month and you don’t even realize how much it is costing you. A while back I read an article at SmartMoney.com that lists 7 Things You’re Wasting Money On.

1. Bottled Water
2. Extended Warranties
3. Gym Memberships
4. Overdraft Fees
5. Organic Produce
6. Auto Insurance
7. Music Downloads

At some time or another each of us has spent money on most if not all of these items.  Some may seem like they are necessities, but with a little bit of work, you can still enjoy the benefits without wasting the money.  For example, bottled water.  You can try using a filtered pitcher such as Brita.  Auto Insurance can often be found cheaper from another company, or maybe your current company will offer a discount.  What about that gym membership? Do you really need to go to the gym to use their treadmill? Try a nice walk around the block.

The one that seems to be the most detrimental to your long-term financial plan is the overdraft fees.  If you can convince yourself to start living on a budget, then you can eliminate overdraft fees from your life very easily.  The solution is very simple; first, keep your checkbook balanced or monitor your account online at least once a week. Second, stop using your credit and and finally, don’t use your debit card on anything other than what you have budgeted.

It isn’t difficult but it does take some discipline.

I have often recommended that people give up their cable TV in an effort to decrease their monthly expenses and help pay down their debt.  The usual response is “No way!”.  I can completely understand why they feel this way.  Watching television has almost replaced baseball and the national pastime.  Now with HD television, large screen plasma panel and more channels than anyone can possibly watch in a lifetime, it is very easy to understand why so many people feel like they couldn’t live without it.

What about you? Ready to give up cable TV for the benefit of your kids and your wallet? If not, why not? Leave a comment and let us know how much you are spending each month on cable TV and all of the extras that go with it.

The majority of households today use some form of automatic bill payment.  Whether you have an automatic draft taken directly from your checking account or use your credit card to automatically pay a few bills, the convenience of not having to write a check for every single bill is great.  However, with every good thing there is usually a downside. How can there be a downside to not having to write a check and find a stamp and remember to take it to the mailbox? Glad you asked.

The convenience of getting an email that says your bill has been paid is great, but you need to take the next step and actually look at the bill that has just been paid.  To often the bill you just paid will include some unexpected fee that you didn’t know would be there, or maybe that credit card account now has a higher interest rate, but you didn’t know they were raising the fee because you didn’t review the statement when they said you had 30 days to opt-out of the rate hike.

This is what I like to call Bill Creep.  Like a cluttered garage, often times our monthly expenses get cluttered with things that we continue to pay for, but probably no longer need.  Other things that can wreck your month without you knowing about it are things that at one time sounded like a good idea, but because of changes in your life, now just aren’t practical.  One example is a gym membership.  When you made that New Year’s resolution to get into shape you signed up for the two-year membership because of the New Year’s special they were running.  Good deal you thought – ‘best value’.  However, do you really need to pay extra each month for a personal trainer and massage?  Sure it makes you feel good, but is the value really worth the extra amount you are paying?

What can you do to combat the ‘Bill Creep’?  First, commit to reviewing each and every bill that you receive.  If there are new services or fees being tacked onto your account, call the customer service rep and kindly ask them to be removed.  Surprisingly, during this economic downturn, most companies are willing to work with customers rather than lose them.  Also, determine if you really need all the extra services that you may have agreed to.  Do you still need all three of those movie channels?  What about your cell phone?  Does the service provider now offer a better package that includes the same (or more) minutes that you just didn’t know about?  A few minutes of diligence can save you a lot of money over the period of a year.

After getting back from a vacation at Disneyworld I must tell you all that I don’t have alot of energy.  It was a great family vacation, but exhausting.  The tips below though, will not make you feel exhausted as you use them to try and save some money every month.

1.  Cut cell phone service down to minimum. Talk to your current provider about reducing your monthly minutes, or eliminating features you just don’t use that often.

2.  Consider dropping home telephone service. Just about the only people who call us these days are telemarketers. Most friends and family have cell phones and those that are “in network” can talk to us for free for an unlimited amount of time.  Even if you don’t cancel your home telephone service, you can probably save some by cutting back on extras like call waiting, caller ID, etc.  Since you are not using the land-line that much, you won’t miss the features.

3.  Raise car insurance deductibles if emergency fund in place.  If you have a solid emergency fund in place to easily cover deductibles, it might make sense to increase those deductibles on your auto insurance policy.  Raising deductibles from $250 to $1,000 can save you a few hundred dollars on insurance–just be sure you can afford that $1,000 in the event something bad happens.

4.  Reduce the temperature setting on your hot water heater. This one does require a little effort, especially if your water heater is in an out-of-the-way place.  Set the temperature to around 120 degrees.  You can count on about a 5 percent reduction on energy bills for each 10 degrees you drop the water.  While you are at it, consider a thermal blanket to insulate your water heater, particularly if it is stored in an uninsulated location that gets cold in the winter (garage, utility room, etc.).

5.  Run your ceiling fans in the winter. I know, it sounds crazy. By changing the blade direction on your ceiling fan to create an updraft, you can help recycle heat throughout a drafty room. Most fan models have a switch on the base of the unit that allows you to change direction.

6.  Use microwaves in the summer, and ovens in the winter.  During the dog days of summer, cranking up an oven can put an air conditioning system into overdrive.  However, in the winter the warmth of an oven can lessen the load of your heating system.  Your monthly utility bill will thank you.

7.  Divide credit card payments in half.  If you are already paying $100 a month on your credit card, half the amount and schedule two payments with the first coming about half way through the billing cycle.  Since interest is calculated using the card’s average daily balance, you’ll be reducing that balance earlier in the month by paying a little bit of the balance off, instead of waiting the full month to make a single payment.

9.  Disconnect electronic devices when not in use.The easiest way to do this is to plug devices into a single power strip and then unplugging the power strip when the items are not in use.  Electronic items continue to pull small amounts of power continuously even when powered down (this phenomenon is often referred to as “vampire power,” probably because it is sucking the life out of your finances!

10.  Improve your car’s gas mileage by replacing the air filter.  I know I said these would be effortless, but this one is so easy you can do it in less than five minutes.  Stop by a parts store and ask for a new air filter.  They will need to know your vehicle’s make, model, year and maybe the engine size (six-cylinder, eight-cylinder, etc.).  All this information should be listed in your owner’s manual, or on the inside of your driver’s side door panel.  Following the directions in your owner’s manual, which include locating the filter’s housing, removing a few screws, and swapping out filters, only take a few minutes of time.

11.  Use a drying rack for heavy linens. If you aren’t up for hanging a clothesline (or your neighborhood frowns on their use), consider buying  a simple drying rack to hang heavy towels and jeans over.  When the clothes are nearly dry, toss them in the dryer for a couple minutes with a fabric softening pad to freshen them up a bit and remove most of the wrinkles.

Saving money doesn’t have to be a chore, and in most cases requires very little (if any) investment up front. Give a few of these ideas a try, and feel free to add a few of your own ideas in the comments below.

Some Warren Buffet wisdom I came across, with my comments added.  Enjoy!

Reinvest your profits – this is the only way to take advantage of compound growth, which is money growing on money.

Be willing to be different – you follow the herd, you’re gonna get hurt. Going against the herd may be scary, but can pay off if done properly.

Never suck your thumb – If you find something good, act. Don’t sit around doing nothing.

Spell out the deal before you start – Get all the details in writing before you follow through.

Watch small expenses – The article mentions a guy who counted 500-sheet rolls of toilet paper to make sure he wasn’t being ripped off. That seems a bit extreme to me but I see the point of not wasting money.
Limit what you borrow – I believe that the only acceptable forms of debt are student loans, car loans (reasonable car loans), mortgages, and possible 0% deals that may pop up every once in a while. Now, don’t mistake that sentence to mean that I think it’s okay to have debt—that’s not what I’m saying. The main thing is to use debt as a tool and use it wisely.

Be persistent – Always remember the saying: “If at first you don’t succeed, try, try again.”

Know when to quit – You have to know when to say, “when.”

Assess the risks – Do some worst-case-scenario analysis before you proceed. In other words, count the costs before you begin.

Know what success really means – I love the fact that Buffett is not on an ego trip with his giving. According to the article, Buffett does not want any buildings named after him. That’s soooooo cool! I really respect that about him.

I am trying out something new starting this week – Personal Finance Tip of The Week!

This weeks tip involves…Free Personal Finance Templates!

As you might already be aware of, Microsoft is no longer selling Microsoft Money and will end support sometime around January 31, 2011.  If you have been using Microsoft Money or some other priced Personal Finance software, maybe now might be the time to look for an alternative.  Manage your finances for FREE using Google Docs Personal Finances Templates!

I personally have been searching for months to find financial tracking software that works for me.  I have toyed around with several, but have yet to settle on a solution that is perfect for me.  There are a lot of great solutions out there… some are free, some are not.

A Few Software Solutions That Cost Money

• Mvelopes – Applies financial software technology to the traditional envelope method of budgeting and is a popular choice among PF Bloggers.  They offer a 14-day free trial and their prices are as follows: Quarterly = $39.60 ($13.20/mth) – 1 Yr = $129.60 $10.80/mth) – 2 Yr = $189.60 ($7.90/mth)
• Quicken – Touted as America’s #1 Personal Finance software, Quicken offers a variety of products ranging from $0 (online version) to $99 (business version).
• You Need A Budget - While this app is not free, they do offer a generous 60-day free trial; I know of at least a few PF Bloggers use this program to manage their finances.
• MoneyDance – Organize your finances, manage your budget, track your portfolio, or just automatically balance your checkbook

A Free Solution from Google Docs

I am not opposed to paying for software, but I am also not afraid to examine free tools to see if their offerings are sufficient for my needs.  There are a lot of useful templates Google Docs inventories, and I am currently testing several and am impressed so far.  I especially like the rating system, which allows me to see which templates have been more useful to more users without having to waste my time trying each one.

Currently Google Docs is offering three sections of Personal Finance templates.

Manage Your Expenses

This section mostly gives you a choice between Family Budgets or Personal Budgets, but also has several spreadsheet templates for Wedding Budgets and even offers a Home Improvement Spreadsheet.

Pay Off Your Debt

This section is currently offering payment calculators.  Specifically there is a Credit Card Payoff Calculator, a Mortgage Payoff Calculator, and a Simple Loan Calculator.

Grow Your Savings

This section offers several tools to help you get you manage and grow your savings account including registers, ledgers, & calculators.

What do I use?

As I mentioned above, I have not settled on my perfect solution as of yet, but to-date I use Microsoft Money for my checkbook needs.  I also use Excel for budgeting purposes.

Currently I have begun taking a serious look at using Google Docs Personal Finance Templates as a free solution to manage my affairs.

If you are looking for a free solution, Google Docs PF Templates has a strong offering that only stands to grow, expand, and improve as time goes on.  I will certainly report back and let you know what I have settled on once I decide!